Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
Problem 1TY
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Question
- Suppose that the level of income is $1000 and the tax rate is 0.1 %.
Given this data, what is the level of disposable income?
Use the following information to answer questions 5 through 8:
Consider the following information for Slovenia.
|
Category |
Amount |
|
Autonomous Consumption |
430 |
|
MPC |
0.9 |
|
Tax Rate |
0.25 |
|
Investment |
800 |
|
Government Expenditure |
100 |
|
Exports |
20 |
|
MPI |
0.05 |
- What is the equilibrium level of GDP in the income-expenditure model?
- Suppose that there is a decrease in Exports by $20. What is the new equilibrium level of GDP in the income-expenditure model?
- What is the difference between the original and new GDP as a result of a decrease in Exports?
- Suppose that MPC is equal to 0.8. What is the spending multiplier?
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